1. Field of the Invention
The present invention relates generally to the preparation and filing of tax returns using online and desktop tax preparation and planning software.
2. Description of the Related Art
At present, tax preparation is generally based on a tax form model for collecting information about a taxpayer's income, deductions, and tax credits. Information is solicited from the taxpayer in a way that directly follows the format and sequence of government tax forms such as Internal Revenue Service forms 1040, 1098, 1099, W2, Schedule E, etc. These forms segregate the tax information into tax-oriented categories of taxpayer status, income, wages, deductions, etc. Because taxpayers are generally not accustomed to thinking this way on a day-to-day basis, it is often counterintuitive and hence difficult to provide the information requested. Even once the correct form is known, the data that must be provided is often not easy to determine. For that reason, the process of going through a tax form line by line and entering data can be both arduous and counterintuitive.
In order to avoid the necessity of going to a CPA and having a return professionally prepared, taxpayers have turned in recent years to computer programs designed to assist with tax return preparation. Most tax preparation software follows the “forms” format in an “interview” in which the taxpayer answers questions and inputs data based on the sequence of tax forms. There still remains much of the confusion and difficulty of the tax process for the taxpayer trying to complete her return.
Early attempts at improving tax return preparation focused on importing data from financial management software, such as Quicken™ by Intuit of Mountain View, Calif.; or Money, by Microsoft Corporation of Redmond, Wash. The TaxLink import system found in Intuit's TurboTax product provides one way for users of personal finance applications to import certain data from their financial management software into the tax preparation software. However, the user is required to know from which files to import tax related data, and must manually conduct the transfer. This results in the transfer of data that may not actually be necessary for preparation of the taxpayer's tax return. In addition, the user is required to import the data prior to entering the interview portion of the program.
Accordingly, what is needed is a new way of soliciting information from a taxpayer in order to prepare a tax return, which does not depend on a forms-based interaction in order to allow the taxpayer to provide data in a more intuitive fashion and yet still allow for the effective and accurate preparation of a tax return using tax preparation software.
Another observation that can be made about electronic preparation of tax returns is that while much of the data that must be input into the electronic software is repetitive from year to year—a taxpayer's employer, employer EIN, bank account, etc., typically change little or not at all from year to year—the dollar amounts involved do change regularly. Thus, each new year, and with each new edition of a tax preparation application, this data has to be manually entered. Accordingly, what is needed is a way of remembering information about a user from year to year and importing only changed data electronically, thus reducing the amount of taxpayer information that must be input each year.
Yet another observation that can be made about tax data and preparation of tax returns by a taxpayer is that much of the information that is ultimately needed by the taxpayer for preparation of his return is already stored electronically somewhere outside of the user's reach. For example, information about the taxpayer's wages for the year may be stored electronically by a payroll provider on its local system. At the end of the year, the provider prints a W2 containing all of the taxpayer's earning information for that year, and typically mails the W2 to the taxpayer. When the taxpayer receives the paper W2, he must then enter the data into his tax preparation software. This process is inefficient. Indeed, for taxpayers who have not just one W2, but a large number of forms received every year as the result of multiple relationships with financial institutions, the inefficiency is magnified. Thus, it would be desirable to provide a means by which taxpayers could obtain their taxpayer data from a multitude of tax data providers in electronic form suitable for import into tax preparation software, thus saving them the overhead of having to re-input the data by hand into electronic tax preparation software.
Referring now to FIG. 1, there is shown an illustration of a conventional method of tax return preparation using tax preparation software. At the beginning of the interview 101, the user has the opportunity to import data 102. This is typically an all-or-nothing type import, e.g. import all available data from Quicken, or none at all. Once data has been imported, the forms-based interview 104 begins. First, the taxpayer is asked to define 106 his status, e.g. single, married filing jointly, etc. Next, the taxpayer uses his W2 116 to enter information about his wages 108. Similarly, Form 1099 118 contains information the user must enter for the income section 110, and other forms such as Schedule K-1 must also be entered where necessary. The user also enters information about itemized deductions 112, etc. All of this information must be manually entered by the user. Finally, the conventional process ends with the software preparing a tax return document 114.